A new report highlights the precarious nature of many families’ finances, with many unprepared for a sudden loss of income.
The research, carried out by Legal and General, looked at how financially prepared UK consumers were. It found that 33% of British families have no financial safety net in place to cope with a sudden loss of income. Almost two thirds (60%) don’t even expect to receive any financial help from family and friends, and nearly half (48%) don’t have any form of protection insurance.
For those who do have some form of protection in place, savings are the most popular option - favoured by 41%. However, the average family has just £660 in their savings pot, which won’t go far given the current increase in living costs.
Some expected friends and family to help out, but the average family expected just £155 per month in support - enough to cover just 10.9% of essential spending at the current cost of living.
Duncan Finch, executive managing director at Legal and General, said:
“British families remain in a financially precarious situation despite signs of recovery in the UK economy. Daily financial pressures mean that many households are unable to put enough money aside as a safety net. Unfortunately 60 per cent of households are unable to rely on either family or friends for financial support and changes to the welfare system will reduce the ability of the state to assist in a financial catastrophe. Clearly there are some worrying gaps when it comes to UK consumers planning their personal finances.”
The findings also highlighted differences between age groups. As might be expected, 50% of 18-14 year olds have no financial safety net, whilst older people are better prepared - only 28% of over 65s are without a strategy.
“Cutting back on saving and protection insurance may save money to meet bills in the short term but is not a good idea over the long-term. Encouragingly, our research shows that 31 per cent of households do indeed have critical illness or life insurance cover. However, it's crucial that those families without protection have a comprehensive financial strategy so they are well placed to deal with financial hardship.”